IRDAI has imposed a fine of Rs.1 crore on Tata AIG General Insurance for violating IRDAI Regulations on the protection of policyholders' interests.
The insurance regulator had found that Tata Capital Financial Services, which is a corporate agent of the Tata AIG General Insurance had disbursed loans to policyholders for paying premium. The company had charged interest on the entire loan amount instead of charging interest on disbursed payment. Simply put, the agent charged interest on entire premium (first year premium and two renewal premiums) at an interest rate of about 13% per annum.
In a circular IRDAI said, “The corporate agent collected renewal premium at the time of issue of a three-year policy issued by the general insurer. To fund this amount of three-year policy premium plus another three-year renewal premium, the corporate agent provided loan to the policyholders and charged interest at 12.25-13% p.a. on the whole amount of loan granted.”
IRDAI directed the company to pay penalty within 90 days.